Subjective beliefs and confidence when facts are forgotten

Forgetting can be a salient source of uncertainty for subjective beliefs, confidence, and ambiguity attitudes. To investigate this, we run several experiments where people bet on propositions (facts) that they cannot recall with certainty. We use betting preferences to infer subjects’ revealed beliefs and their revealed confidence in these beliefs. Forgetting is induced via interference tasks and time delays (up to one year). We observe a natural memory decay pattern where beliefs become less accurate and confidence is reduced as well. Moreover, we find a form of comparative ignorance where subjects are more ambiguity averse when they cannot recall the truth rather than never having learnt it. In a different vein, we identify an overconfidence pattern: on average, subjects overpay for bets on propositions that they believe in, but underpay for the opposite bets. We formulate a two-signal behavioral model of forgetting that generates all of these patterns. It suggests new testable hypotheses that are confirmed by our data.

     

Negotiation and Defeasible Decision Making

In economically meaningful interactions negotiations are particularly important because they allow agents to improve their information about the environment and even to change accordingly their own characteristics. In each step of a negotiation an agent has to emit a message. This message conveys information about her preferences and endowments. Given that the information she uses to decide which message to emit comes from beliefs generated in previous stages of the negotiation, she has to cope with the uncertainty associated with them. The assessment of the states of the world also evolves during the negotiation. In this paper we analyze the intertwined dynamics of beliefs and decision, in order to determine conditions on the agents that allow them to reach agreements. The framework for decision making we consider here is based on defeasible evaluation of possibilities: an argument for a choice defeats another one if it is based on a computation that better uses all the available information.     

Public support for the social rights and social obligations of the unemployed: Two sides of the same coin?

In light of the ever‐growing shift towards activation in European welfare states, the present article examines the relationship between citizens’ welfare generosity (i.e., support for social rights) and welfare conditionality (i.e., support for social obligations) with regard to the unemployed. Using data from the 2014 Belgian National Elections Study, we found that generosity and conditionality appear to be two sides of the same coin. The two factors are negatively correlated, and most of their respective attitudinal drivers are quite similar in strength, yet opposite in direction. In addition to self‐interest and conventionally recognised ideational beliefs, such as egalitarianism and individualism, beliefs about welfare deservingness – an explanatory factor that has remained understudied in the field – are particularly influential in shaping people’s welfare preferences. A stronger emphasis on criteria of deservingness such as control, attitude and reciprocity considerably lowers support for social rights and strengthens support for social duties.     

Learning-by-doing in an ambiguous environment

How well do revealed ambiguity preferences predict how people choose to seek new information about uncertain events? In an economics experiment, we apply a new instrument to measure ambiguity preferences, and in a later session observe to what extent the measure predicts the choice to receive costly information in a learning-by-doing game. Ambiguity averse subjects are more willing to pay to receive information, while risk averse subjects are not. Holding ambiguity preferences constant, risk averse subjects tend to perform worse than risk loving subjects. The returns to experimentation, especially for ambiguity averse subjects, suggest a not-well studied but important role that ambiguity preferences play in decision-making under uncertainty.     

Ellsberg paradox: Ambiguity and complexity aversions compared

We present a simple model where preferences with complexity aversion, rather than ambiguity aversion, resolve the Ellsberg paradox. We test our theory using laboratory experiments where subjects choose among lotteries that “range” from a simple risky lottery, through risky but more complex lotteries, to one similar to Ellsberg’s ambiguity urn. Our model ranks lotteries according to their complexity and makes different—at times contrasting—predictions than most models of ambiguity in response to manipulations of prizes. The results support that complexity aversion preferences play an important and separate role from beliefs with ambiguity aversion in explaining behavior under uncertainty.     

The strength of sensitivity to ambiguity

We report an experiment where each subject’s ambiguity sensitivity is measured by an ambiguity premium, a concept analogous to and comparable with a risk premium. In our design, some tasks feature known objective risks and others uncertainty about which subjects have imperfect, heterogeneous, information (“ambiguous tasks”). We show how the smooth ambiguity model can be used to calculate ambiguity premia. A distinctive feature of our approach is estimation of each subject’s subjective beliefs about the uncertainty in ambiguous tasks. We find considerable heterogeneity among subjects in beliefs and ambiguity premia; and that, on average, ambiguity sensitivity is about as strong as risk sensitivity.     

Belief formation in a signaling game without common prior: an experiment

Using belief elicitation, the paper investigates the process of belief formation and evolution in a signaling game in which a common prior is not induced. Both prior and posterior beliefs of Receivers about Senders’ types are elicited, as well as beliefs of Senders about Receivers’ strategies. In the experiment, subjects often start with diffuse uniform beliefs and update them in view of observations. However, the speed of updating is influenced by the strength of initial beliefs. An interesting result is that beliefs about the prior distribution of types are updated slower than posterior beliefs, which incorporate Senders’ strategies. In the medium run, for some specifications of game parameters, this leads to outcomes being significantly different from the outcomes of the game in which a common prior is induced. It is also shown that elicitation of beliefs does not considerably change the pattern of play in this game.     

Estimating representations of time preferences and models of probabilistic intertemporal choice on experimental data

We here estimate a number of alternatives to discounted-utility theory, such as quasi-hyperbolic discounting, generalized hyperbolic discounting, and rank-dependent discounted utility with three different models of probabilistic choice. The data come from a controlled laboratory experiment designed to reveal individual time preferences in two rounds of 100 binary-choice problems. Rank-dependent discounted utility and its special case—the maximization of present discounted value—turn out to be the best-fitting theory (for about two-thirds of all subjects). For a great majority of subjects (72%), the representation of time preferences in Luce’s choice model provides the best fit.     

Deterring domestic violence: Do criminal sanctions reduce repeat offenses?

This study presents an empirical analysis of domestic violence case resolution in North Carolina for the years 2004 to 2010. The key hypothesis is that penalties at the level set for domestic violence crimes reduce recidivism (re-arrest on domestic violence charges or conviction in 2 years following an index arrest). We use state court data for all domestic violence-related arrests. Decisions to commit an act of domestic violence are based on a Bayesian process of updating subjective beliefs. Individuals have prior beliefs about penalties for domestic violence based on actual practice in their areas. An individual’s experience with an index arrest leads to belief updating. To address endogeneity of case outcomes, we use an instrumental variables strategy based on decisions of prosecutors and judges assigned to each index arrest in our sample. Contrary to our hypothesis, we find that penalities, at least as set at the current levels, do not deter future arrests and convictions.     

Giving in the face of risk

Decisions about how to share resources with others often need to be taken under uncertainty regarding its allocational consequences. Although risk preferences are likely important, existing research is silent about how social and risk preferences interact in such situations. In this paper we provide experimental evidence on this question. In a first experiment givers are not exposed to risk while beneficiaries’ final earnings may be larger or smaller than the allocation itself, depending on the realized state of the world. In a second experiment, risk affects the earnings of givers but not of beneficiaries. We find that individuals’ risk preferences are predictive for giving in both experiments. Increased risk exposure of beneficiaries tends to decrease giving whereas increased risk exposure of givers has no effect. We propose a simple non-linear generalization of a model allowing for other-regarding preferences, ex-post and ex-ante fairness, and risk aversion. We find some support for it in our data when risk is on the beneficiaries’ side but less so when risk is on the givers’ side. Our results point to the importance of the further development of models of social preferences that also incorporate risk preferences.     

Gay Men's Knowledge of HIV Transmission and ‘Safe’ Sex: A Question of Accuracy

The study described in this paper is part of a project assessing the impact of the HIV epidemic on 535 men who have sex with men. These men were surveyed about their knowledge of HIV, their sexual practices, other issues concerning the transmission of HIV, and AIDS. This paper focuses on these men's beliefs about HIV transmission, their perceptions of the safety of a number of sexual and social practices, and the factors influencing these perceptions. The findings indicate, in general, that the men surveyed were moderately well informed about HIV transmission. Some twenty percent of the men were well-informed about both ‘safe’ and ‘unsafe’ sexual practices, a small number were ill-informed and the remainder, the majority, were well-informed about some aspects and ill-informed about others. The data suggest that information from the mainstream and gay press is not only differentially available but that information is processed and interpreted by the men in different ways. Variables which influence the manner in which information is interpreted are place of residence (locale), awareness of gay community posters and pamphlets, and the men's sexual practice; these are associated with cautiousness or rashness in the men's judgments of safety and risk.     

A parsimonious model of subjective life expectancy

On average, “young” people underestimate whereas “old” people overestimate their chances to survive into the future. Such subjective survival beliefs violate the rational expectations paradigm and are also not in line with models of rational Bayesian learning. In order to explain these empirical patterns in a parsimonious manner, we assume that self-reported beliefs express likelihood insensitivity and can, therefore, be modeled as non-additive beliefs. In a next step we introduce a closed form model of Bayesian learning for non-additive beliefs which combines rational learning with psychological attitudes in the interpretation of information. Our model gives a remarkable fit to average subjective survival beliefs reported in the Health and Retirement Study.     

The Impact of Health-Related Emotions on Belief Formation and Behavior

We present a theoretical model of health beliefs and behaviors that explicitly takes into account the emotional impact of possible bad news (i.e., illness), ex-ante in the form of anxiety and ex-post in the form of disappointment. Our model makes it possible to explain (simultaneously) a number of anomalies such as ’low’ testing rates, heterogeneous perceptions of risk levels, underestimation of health risk, ostriches and hypochondriacs, over-use and under-use of health services, patient preference for information when relatively certain of not being ill, yet avoiding information when relatively certain of being ill, etc. Our model matches observed patterns both in health beliefs and health behaviors and irrational health beliefs and behaviors can be characterized as the optimal response under a given structure of emotions and preferences.     

Risk aversion and religion

We use a dataset for a demographically representative sample of the Dutch population that contains a revealed preference risk attitude measure, as well as detailed information about participants’ religious background, to study three issues. First, we find strong confirmatory evidence that more religious people, as measured by church membership or attendance, are more risk averse with regard to financial risks. Second, we obtain some evidence that Protestants are more risk averse than Catholics in such tasks. Third, our data suggest that the link between risk aversion and religion is driven by social aspects of church membership, rather than by religious beliefs themselves.     

Exploring crisis and its effects on workers in child protective services work

An inquiry into child welfare protective services workers’ perceptions and experiences in the United States was conducted in order to examine their perceptions of crisis and crisis intervention, and the emotional impact of working with children who endured significant maltreatment. As there is presently little research that has explored these issues specifically from the point of view of the workers, a qualitative grounded theory approach was utilized. Four themes emerged from the data: workers perceived crisis as a result of biopsychosocial breakdown; workers routinely triage when faced with crises; workers are subject to vicarious traumatization; and workers’ personal lives are affected by their work. The findings add to an existing body of knowledge about secondary trauma in child welfare by providing information about the investigative workers’ subjective experience of it. This research adds a unique contribution to understanding workers’ subjective experience of crisis on the job, how it manifests, and whether they feel knowledgeable in the area of crisis intervention.     

Time preferences and risk aversion: Tests on domain differences

Understanding how individuals discount and evaluate the risks of environmental outcomes is a prime component in designing effective environmental policy. We use an incentivized experimental design to investigate whether subjects’ time preferences and risk aversion across the monetary and environmental domains differ. We find that subjects’ time preferences are not significantly different across the two domains. In contrast, subjects exhibit a higher degree of risk aversion in the environmental domain. Furthermore, we corroborate earlier results, documenting that women are more risk averse than men in the monetary domain, and show this finding to also hold in the environmental domain.